Why use Online Tax Software ?

Online Tax Software dramatically simplify the process of filing one's tax return. IRS tax forms can be difficult to understand and fill out correctly. Entering information incorrectly can lead to mistakes in the amount you owe and/or the amount of your refund, which equates to cash out of your pocket. All of the online tax return preparation software/ services in our survey take you through an interview process in layman's terms. When the interview is complete, the software will complete your tax return, putting the information you provided in the interview in all the right places, and will tell you what you owe or what you will be getting back in the form of a refund. Most of these products allow you to utilize the IRS e-file option so you don't even have to print out your return and mail it in. Furthermore, most of the products in our survey guarantee their results and will pay any fees levied by the IRS as a result of any mistakes. Therefore, when you purchase one of these services you are also receiving an insurance policy that covers your tax liability.

What are the Standard Features of a Tax Return Preparation Service:

There are a number features that you will find with all online tax software products.

♦ Checking for errors is a feature you will find with any service.

♦ Calculating deductions is a feature you will find with any online service.

♦ The IRS determines how long it will take to get your refund so it will not come faster or slower with any particular service. However, some vendors, such as TaxCut or TurboTax, have programs to loan you a portion of your refund when you file your return.

♦ Some of the advanced business products offered by some vendors will prepare 1099's, W-2's and K1's. However, none of the products in our survey have this feature.

What should I look for in an Online Tax Software Provider?

First and foremost, you should make sure that the vendor you are purchasing offers all of the features you need to accurately complete your tax return. Tax return preparation should be taken very seriously. Trying to use an insufficient service could lead to the preparation of an inaccurate tax return, which could cost you significantly more money in the long run than you saved by purchasing an inexpensive tax return preparation service.

If you use personal accounting software such as Quicken, Gainskeeper or Microsoft Money, we recommend purchasing an online tax preparation service that syncs with that software. Doing so will dramatically simplify the process of preparing your tax return.

It will also simplify the process if you purchase a service that syncs with your tax return from last year. However, do not feel like you need to use the same service you used last year, especially if you were not satisfied with the results. This is a competitive market and the smart vendors know that if they want to take customers away from their competition they will have to make their products compatible with their competitions products. For instance, TaxCut will sync with previous returns prepared by Turbo Tax.

You should also check with your employer to see if they are set up to integrate your W-2 with any particular tax preparation service. This could save you a lot of time, which should factor into your decision.

Customer service is very important. This stuff is complicated. You want to be able to ask someone questions when they come up. You should definitely avoid vendors that have bad or no customer service.

What do I do about filing state income tax?

Alaska, Nevada, New Hampshire, South Dakota, Tennessee and Texas don't have state income tax. If you live in one of those states you won't need to purchase the state ad on. However, you will have to file a state income tax return in every other state in which you earn income. It's possible that you might have to file state income tax in another state even if you're not a resident of that state. Each state has its own requirements. Some give you a break if you make less than a certain amount, if you're in the military, etc. Fortunately, a good tax preparation service will use the information you provided for your federal tax return to prepare your state tax return, or returns if you have income in more than one state.